Private Student Loans And Questions To Ask

If you have exhausted all other financial aid options for college (including scholarships, grants, and federal student loans) and your costs are still not covered, you may be considering a private student loan. There are many things to consider when researching private lenders and private student loan information, but this post will focus on some of the more common (and more important) questions you should ask when comparing private student loans for college.

The 2009 Truth In Lending Act requires private lenders to provide clear, complete information on loan terms and conditions before a borrower applies. Prior to the new Application and Solicitation Disclosure forms, lenders were allowed to advertise interest rates and fees available to those with nearly perfect credit scores, even though the majority of those applying for the loan would not qualify for those rates and fees. Lenders will now be required to provided borrowers with upfront disclosures, outlining the full range of terms and fees which should make it easier for borrowers to compare different loans. Some factors you will want to consider when comparing private student loans:

1. Does the loan have a fixed or variable interest rate?


2. If the loans interest rate is variable (most are) , is there a ceiling on how high a variable interest rate may climb during the life of the loan (most do not have a cap)?

3. How long is the loan repayment period, and is there any penalty for paying off the loan early?

4. If any discounts come with the loan, find out if the discounts are guaranteed or if they can be subject to change at a later date?

5. What are my repayment options, should I have difficulty making my payments (if any)?

You can learn more about private student loans, by visiting our Private Student Loan section.